New column: Bob Shiller’s plan to fix things

After a long summer hiatus, I finally have a column in the magazine again, in the issue of TIME with Sarah Barracuda on the cover. It begins:

Economist Robert Shiller has a new book out. You’ll be thrilled to learn that it doesn’t contain any warnings about a looming market crash. Well, unless you count that bit about the “train of catastrophes” that might ensue if current efforts to stabilize the financial system fail. But that’s not really a prediction.

Considering the Yale professor’s recent publishing history, this is quite a relief. In March 2000, as stock prices soared to record levels, Shiller released his first general-audience book. Titled Irrational Exuberance, a phrase borrowed from a 1996 Alan Greenspan speech, it made the case that stock-market investors tend to go mad every few years–and that they were at the time in the grips of perhaps their worst psychotic episode ever.

That month, stock prices started to fall. The slide continued for 2 1/2 years. Then, for the second edition of Irrational Exuberance, published in February 2005, Shiller added a chapter on real estate. His argument: House prices had followed the stock market into a flight of fancy that was bound to end badly. Read more.